If you’re a dentist, doctor or vet, the idea of buying your practice property through an SMSF has probably crossed your mind. After all, if you’re already paying rent each month, it could be worth exploring whether directing those payments to your own super fund is a better option, rather than adding to someone else’s investment.
It’s a strategy that appeals to many practice owners, but as with anything involving the ATO, there are rules, and you need to get the setup right from day one. Done correctly, buying your practice property through an SMSF can be a smart way to build long-term wealth, reduce tax, and secure your business premises for the future.
Benefits of buying your practice property through an SMSF
There are several reasons healthcare professionals choose to buy their practice property through an SMSF:
- Tax efficiency: Investment income inside an SMSF is taxed at just 15%, and this can drop to 0% in retirement. That’s a big saving compared to paying tax at your marginal rate.
- Control and stability: Owning your practice premises through your SMSF gives you long-term control of your tenancy. No more worrying about rising rents or losing your lease.
- Asset protection: The property is owned by your SMSF, not your business entity. If your business ever faces legal or financial issues, the property remains protected within the fund.
- Rental income stays in your super: The rent your practice pays becomes an income stream for your retirement. Instead of paying rent to someone else, you’re essentially paying rent to your future self!
Conditions and rules you need to know
This strategy comes with some strict rules and definitions set by the ATO. The key one is the “business real property” requirement. The property must be used wholly and exclusively for business purposes with no private use at all. A mixed-use property (for example, a shop with a residence above it) won’t qualify unless it meets the ATO’s narrow exemption for primary production land.
The transaction must also be:
- At market value, supported by independent valuation.
- Allowed under your SMSF’s investment strategy.
- Consistent with the sole purpose test – the fund must exist to provide retirement benefits, not personal perks to members.
- On arm’s-length terms, meaning rent and lease conditions match commercial standards. You can’t charge yourself cut-price rent.
These rules are non-negotiable. If they’re breached, the ATO can impose heavy penalties and even disqualify the fund.
Fees and risks to consider
As with any property purchase, there are costs involved: legal fees, stamp duty, valuation costs, ongoing property management, and (if applicable) loan setup and bank fees.
There are also potential risks:
- Cash flow must be strong enough for the fund to meet loan repayments.
- Borrowing costs for SMSFs are typically higher.
- You can’t use borrowed funds to make major property improvements until the loan is fully repaid.
- If documentation isn’t correctly structured, it can cause serious compliance and tax issues later.
For these reasons, working with an experienced accountant is essential before buying your practice property through an SMSF.
How Amalgam Advisors can help
Buying your practice property through an SMSF can be an effective way to grow your wealth, reduce tax, and take control of your business premises. But it’s not a one-size-fits-all solution. It requires careful planning, strict compliance, and the right financial structure from the outset.
If you’re considering buying a property for your practice through an SMSF, Amalgam Advisors can help to explore your options, understand the rules, and make confident, compliant decisions for your financial future. Call us today on 1300 604 380 or fill out our contact form.
